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By Jon Swaine and Holly Watt THE new Chief Secretary to the Treasury avoided paying capital gains tax when he sold his taxpayer-funded second home at a profit.

Danny Alexander, who was appointed last Saturday after the resignation of fellow Liberal Democrat David Laws, designated the property as his second home for the purpose of claiming parliamentary expenses but described it to HM Revenue and Customs as his main home.

On Sunday night, Mr Alexander admitted that he took advantage of a loophole to legally avoid paying CGT when he sold the south London property in 2007 for around £300,000.

The disclosure that he failed to pay CGT comes at a particularly sensitive time because the Coalition is planning to increase the rate of the tax for owners of second homes and buy-to-let properties in an emergency budget this month. When Mr Alexander sold his flat the top rate of CGT was 40 per cent. It has since dropped to 18 per cent but the Lib Dems are now pushing for it to be increased to 40 or even 50 per cent.

The Telegraph is running a campaign calling on the

Government to protect the savings of small investors and ordinary second-home owners from any rise in CGT.

The fact that Mr Alexander has become the second Liberal Democrat to face questions about his finances within three days has focused attention on whether the party leadership has properly audited the financial activities of its senior figures.

Nick Clegg has been highly critical of MPs who avoided capital gains tax on the sale of their taxpayer-funded second homes. The Conservatives thoroughly audited all of their MPs’ claims at the time of the expenses scandal.

After being elected as an MP in 2005, Mr Alexander declared the flat as his second home to the parliamentary authorities and claimed expenses. He claimed more than £37,000 in expenses for the flat – and carried out some work to the property at the taxpayers’ expense shortly before selling in June 2007. Mr Alexander took advantage of a tax loophole that allows people to continue to tell the tax authorities for three years that a property is their main home even if they have bought another house – in

Mr Alexander’s case in Scotland – which has become their “principal residence”. It did not stop him telling the authorities at the House of Commons that the London property was his second home.

The three-year loophole was introduced to give people time to sell their homes during housing market downturns. The Lib Dems have previously criticised its capacity to be abused.

Last year, they attempted to change the law to reduce the period to six months unless people were genuinely struggling to sell their home after moving to another property. This was not the case for Mr Alexander.

Senior accountants this week likened Mr Alexander’s arrangements to those of Hazel Blears, the former Labour minister. Miss Blears was forced to repay money to HM Revenue and Customs after selling a property designated as her second home for parliamentary purposes, without paying CGT.

There is no suggestion that Mr Alexander has broken any tax laws.

Editorial comment, page 19

By Toby Harnden and Richard Alleyne MILLIONS of gallons of oil could be gushing into the Gulf of Mexico until at least August, the White House admitted on Sunday, as BP confirmed the failure of the “top kill” attempt to staunch the flow.

The setback, which President Barack Obama described as being “as enraging as it is heartbreaking”, has the potential to make the Deepwater Horizon disaster the worst environmental catastrophe of modern times.

“More oil is leaking in the Gulf of Mexico than at any other time in our history. It means there is more oil than the Exxon Valdez [spill in Alaska in 1989],” said Carol Browner, the White House energy adviser.

Taking the highest estimates of four million gallons, or 95,000 barrels, of oil being released each day, the disaster could lead to 378million gallons polluting the Gulf of Mexico and its beaches if the leak continues for another 90 days.

That would make it the worst ever peacetime oil spill. Some 520million gallons of

<< How the spill compares >>

Ixtoc Oil Well Gulf of Mexico

Jun 1979 140mg

BP Gulf of Mexico 2010 92mg*

Kuwait oil wells

Persian Gulf Jan 1991 520mg mg million gallons

*Projected total

Atlantic Empress Trinidad and Tobago

July 1979

90mg

79mg

Castillo de Bellver

South Africa August 1983

69mg

Amoco Cadiz

Brittany March 1978

45mg

Haven Italy, April 1991

31 25 11

Torrey Canyon Isles of Scilly March 1967 Braer Shetland January 1993

Exxon Valdez Alaska, March 1989

oil were released into the Gulf during the 1991 Gulf war and 140million gallons spilt into the Gulf of Mexico from the Ixtoc oil well in 1979-80. The Deepwater Horizon disaster has eclipsed the worst oil spill in US history, from the Exxon Valdez wreck off Alaska in 1989, when 11million gallons were released.

An independent government-sponsored team has estimated up to 19,000 barrels of oil a day have been spewing into the Gulf. If the upper end of that rate continued until the end of August, that would represent 70million gallons of oil, making the spill the sixth worst in history.

BP will now try to fit a containment cap on the ruptured well. It could take a week for it to be put in place.

It will use robots to slice through the damaged pipe to make a clean cut that can be connected to another pipe to capture the leaking oil.

The White House warned that in the short term the operation could actually increase the flow of oil by up to a fifth. BP said the operation had never been carried out at a depth of 5,000ft.

Work has also started on two relief wells, which will not be completed until August. The extended drilling means BP’s near-$1billion (£700 million) costs could triple. It has spent more than $850million so far, causing its share price to drop 25pc since the leak started a month ago.